Complexity Theory in International Development

Midterm: In a correctly formatted 5-7 page essay, critically analyze one of the theories we have discussed so far in class -- modernization theory, dependency theory, basic needs, the capabilities approach, complexity theory, or neoliberalism -- and assess its explanatory value in explaining the current state of international development.

I prefer to define Development as Amartya Sen does: "Development is [the] enlarging [of] people's choices, capabilities, and freedoms so that they can live a long and healthy life, they can have a decent standard of living, and they can participate in the life of their community". This encompasses, and more accurately describes, previous ideas of development; economic development, social development, and political development can all be derived from this, but it does not limit itself as narrowly as these do. Additionally, most previous development frameworks are almost entirely economic in nature — with the exception of the capabilities approach — and this severely limits the range of options available to their programs. If we focus on economics only, we miss every other industry that needs to be built for a company to produce a good, or we miss every other capacity needed in a system for an institution to work effectively. You can't just combine labor and capital (Harrod-Domar model), or labor, capital, and technological change (Solow-Swan model), and get Development. If it were that simple, we'd have solved it already (and it's not for lack of trying exactly that, either). Complexity theory gives us both a language and a framework to begin solving these issues. Complexity theory improves over previous frameworks to analyze international development by borrowing theory from other areas of academia where it already works — instead of trying to, as has previously been done with Modernization Theory, Dependency Theory, the Basic Needs approach, and their ilk, start with a Rawlsian Tabula Rasa (and Reason) from which to develop a theory of Development.

The basics of complexity theory are few, but important, and not to be misunderstood: The core of it is that the world exists as a complex adaptive system. This is borrowed from evolutionary biology, and in this context it means that people, industries, and institutions adapt (evolve!) over time to changing conditions — until they are destroyed by a new system that improves upon what they did by an order of magnitude or more, or eliminates the need for them entirely. All of these actors evolve together, simultaneously, and in response to each-other's adaptations (new policies, new cultural values, new technologies, etc). This process is called co-evolution.

These complex systems have a few primary features, and all are important to International Development:

They're complex and everything is interconnected, making them hard to predict — think of the butterfly effect. This means if you make a precise change somewhere in the system (an infusion of capital, or an expanded workforce perhaps), you can't actually predict what the total effect of that change will be.

They have emergent properties. Emergent properties are those which are a characteristic of the system itself — not a characteristic of some individual component of that system. Development is one such property; as we have historically found, you cannot exogenously create development. It cannot be reduced to this aid program, or that FDI procurement, or the liberalization of currency exchanges. It cannot even be broken down to something more broad like neoliberalism because again, that focuses entirely on one facet — economy.

They tend to be broadly predictable. They, however, tend not to be specifically predictable. In Owen Barder's talk, he speaks of the predictable nature of a river and where it might flow, but that if one were to drop a stick in that river you'd have no idea where it might end up.

Complex systems tend towards greater complexity. See: biological evolution towards humans. Barder gives the example of the complexity of modern commodities; he references an approximate 1000 products in hunter-gatherer societies, 100 million species on earth, and the fact that there are 10 billion products in New York today.

Complex systems do not tend towards equilibrium. Contrary to how we treat financial markets (which do not tend towards equilibrium either, even though we classically assume they do), the world does not tend towards equilibrium. What we have are periods of relative calm before discontinuities — call it innovation, if you will, but some world-shifting change in an industry (it becomes obsolete), or institution (someone makes one that does the job 1000x better).

So, what does this mean put together? Development happens in spite of our attempts to trigger it via capital or labor or technology infusions. If we follow complexity theory, the template for development is that there is no template. Our job, if we're to assist in this process, is to help evolve the systems people already have. Directly copying our programs, policies, and best practices won't work because the people developing did not come from where we came from. We evolved the systems we have, and it thus becomes our job to help them evolve their systems too. Development isn't a question of "What missing ingredient can we add for increased production?", it's a question of "how can we create the system necessary to produce a toaster for £1?" That's a much broader problem than any trade liberalization policy, technology transfer, or government restructuring plan can "solve".

Barder presents seven policy conclusions:

Resist engineering solutions. No matter how well-thought your surgical fix to a problem is, it won't ever take into account the system that already exists well enough. Evolve a solution from within the system.

Avoid isomorphic mimicry. Do not create a new institution in a developing place using current best practices because that creates an institution completely disconnected from the local system's context. It will look like it works, but will utterly fail in execution.

Accelerate the evolutionary process. Rather than sitting around and waiting for the problem to fix itself, we can take some of that wonderful development aid and use it to assist in the iteration and testing of new systems in developing countries. Select the successful ones, throw the rest out. With extra resources we can accelerate this process.

Promote innovation. Innovation without selection is worthless. Embrace creative destruction — that's the process where new firms obsolete old firms in the marketplace, or where new institutions obsolete old ones by doing a task orders of magnitude better than the old institution did. Innovation hinges on a fast and accurate feedback loop between the people experimenting and those being effected.

Embrace experimentation. Design a better feedback loop, not a better world. Follow the principle that perfect is the enemy of good. We need searchers, not planners — planners will only result in a 10 or 20% improvement, when we want something like 100x or 1000x better.

Act global. Practice what we preach. If we think that open and fair institutions are important, we should be reforming international institutions because they are part of the system within which these emergent economies operate. Institutions like the G20 that have requirements for joining will engender these values in countries wishing to join. We're part of the system too, and our actions set an example.

The takeaway here is that what we will be doing in international development, if following complexity theory's guide, is to evolve a developed system by innovating, testing, iterating, "selecting" for specific characteristics, encouraging the replacement of inefficient firms with new ones, and doing all of this very quickly with a tight feedback loop. This, in turn, gives us a much clearer frame from which to both analyze what is going on around us in the world, and to discover how we may build institutions and cultures that engender this evolutionary, adaptive approach.

Now, as for the explanatory value of complexity theory for international development, it is rather extensive. By looking at development as an emergent property we see that single-axis exogenous interventions (FDI, political restructuring, privatization of a state function, improving "Good Governance") do not result in progress or development by almost any definition, because they are too narrow. These sort of narrow interventions don't take into account any of the rest of the system, let alone just looking at the second or third order effects of the change being implemented. We have seen Development over time in spite of, not because of, development. Almost all current development methodologies assume that a single problem is actually singular, and not part of a complex interaction between many different actors, industries, and institutions, and so fail because their intervention only addresses one of these. We have to emerge an adaptive co-evolutionary system which supports "Development" (as previously defined).